I haven’t posted on here for years.

Mrs Burns works in VAT and she “kept forgetting to tell me” that HMRC after a year of faffing had finally decided to make the cycle to work scheme non VAT exempt (I had bet her last year that they would not be able to do it).

There were a few things going on in other companies which prompted them to do this, amongst other things, companies started to take the p*ss by handing out vouchers for high-street stores willy-nilly under the same rules that the cycle to work scheme had fought to get.

Apologies if this is old news to the community and has already been posted. The decision was made on the 28th July I think.

NI savings will increase, but effectively if you buy a bike at £1000 it will save you £320 from January 2012 instead of £433

I was told about this last week. A saving is still a saving though.

Not done any research into this so probably out of touch with the proposed changes, but as far as I recall purchasing the bike has never been VAT exempt. As a VAT registered employer we are entitled to claim back the VAT on the purchase price and use the net cost as the amount payable to recoup from the employee under the salary sacrifice deductions.

I agree Don Simon, however for me it does put a fair old stake in the ground with regards to what the government really think about cycling to work.

Coleman, employers can still reclaim back the VAT as before. The rule that has changed is that the end consumer (employee) must now pay the VAT, where-as before, no-one was paying the VAT.

There is a whole chunk of cycling folk who work for councils and other public bodies who have not been able to benefit from their employers being able to claim back the VAT – it will have less affect than tightening up the guidance on final valuations.

NI savings will increase, but effectively if you buy a bike at £1000 it will save you £320 from January 2012 instead of £433

+ 25% of the original price as a settlement fee.

+ 25% of the original price as a settlement fee.

Doesn’t quite work like that, I’m still waiting for them coming back with the quote and value based on the use and wear I gave them. 6 weeks and counting.

geoffj – Member
There is a whole chunk of cycling folk who work for councils and other public bodies and Banks who have not been able to benefit from their employers being able to claim back the VAT – it will have less affect than tightening up the guidance on final valuations.

The change is that the company are now obliged to charge VAT on the “hire charge”, NOT that the original purchase was in any way supposed to be VAT exempt.

Doesn’t quite work like that, I’m still waiting for them coming back with the quote and value based on the use and wear I gave them. 6 weeks and counting.

Ours is an in-house job run along HMRC guidelines so that is what we pay. 18% for less than £500, 25% for more than £500.

As the rules have changed mid scheme my employer is picking up the cost of the change in VAT rules as it is less than they are saving in NI contributions.

Ours is an in-house job run along HMRC guidelines so that is what we pay. 18% for less than £500, 25% for more than £500.

The final value of 18% to 25% are HMRC guidelines as to the value of the bike.
The company do not need to charge this amount but they do need to value the bike at that level….SO if they give you the bike at the end of the period then they have given you a benefit worth 25% of £1000. They must then recover tax etc from you on that £250.
i.e. You pay only the value of the tax on the extra £250 benefit you received. Say about £60. Not that different to what you’d have paid previously 🙂

This is the way our forthcoming scheme will operate.
HTH

I’m confused now. So do you pay VAT on the monthly rental, or just the final charge when you take ownership of the bike?

FunkyDunc, don’t be confused

So do you pay VAT on the monthly rental,

YES.
The most recent change is that you pay VAT on the monthly rental.

or just the final charge when you take ownership of the bike?

and YES
The final valuation guidelines were a previous change, to which one solution is for the company to give you the bike but charge you the INCOME tax on the value of the gift

ok can someone put it simply as totally confused with this ruling.

So for example, if I get a bike valued at £1000 via C2W and I am a 40% tax payer how much is it going to cost me overall???

From one of the horses mouths –

“At the end of the twelve months your employer can offer you the chance to take full ownership. Last September the HMRC did issue a valuation table as to what they believe a bike is worth at the end of the period. At first glance the values are quite high and would have erased a big part of the initial savings.

We sought advice and decided the best way to deal with a transfer of ownership is for an employer to gift the bike to the employee via the completion of a p11d form. Your employer would state what the fair market value is on this form and send it to the HMRC, that way the employee only has to pay the tax on the fair market value as oppose to the whole amount.

It is then up to the HMRC to request the tax from the employee. The employee is the legal owner, everybody has fully complied with the HMRC and the majority of savings have been retained.

I hope this all makes sense. If I can be of any further assistance, please do not hesitate to contact me.

Kind regards

Bike2Work Scheme Limited
Corona Building • Brompton Avenue • Crosby • Merseyside • L23 3BA”

Some people have expressed concerns about companies finding it too much hassle to fill out the HMRC form indicated above, but obviously this will be a company by company thing.

the previous final value fee change has been dodged with HMRC’s blessing by extending the hire period to 4 years for a nominal one-off admin fee (which just happens to be the same sort of number as the previous end-of-term purchase fee that was deemed too small). So you dont pay 25% of the value, or tax on that, after 12-18 months; you pay an “admin” fee, “hire” the bike for another few years at no cost, and then get it given to you at the end of the period by which it has reached zero value. This is certainly what Cyclescheme offer.

Been several threads on this already, Cyclescheme have a pretty good explanation and FAQ (obviously weighted around it still being a brilliant scheme)

http://www.cyclescheme.co.uk/employers/employer-updates/hmrc-vat-update

Youre still getting a bike from your gross salary, so free of income tax and NI, whether that is worth more than an end of season sale bike saving is down to individual bikes and circumstances.